of September 11, 2009
About condition and tendencies of market development of securities in the State Parties of the CIS
The economic council of the Commonwealth of Independent States solved:
1. Take into consideration the Information state-of-the-art review "About condition and tendencies of market development of securities in the State Parties of the CIS", prepared by Council of heads of state bodies for regulation of the security markets of the State Parties of the CIS and considered by the Commission on economic problems.
2. Note that the specified Council makes certain contribution to development of integration cooperation and forming of mechanisms of market economy within the CIS, promoting processes of formation and development of the national security markets, creations of single rules of functioning of this type of the market.
3. Direct the provided material to the governments of the State Parties of the CIS for informing the interested ministries and departments.
4. Charge to Executive committee of the CIS to place in a month the specified Overview on the website of Executive committee of the CIS on the Internet.
Cochairman
Economic council
E.UZAKBAEV Commonwealths of Independent States
COUNCIL OF HEADS OF STATE BODIES ON REGULATION OF THE SECURITY MARKETS OF THE STATE PARTIES OF THE CIS
EXECUTIVE COMMITTEE OF THE CIS
INTRODUCTION
Global financial crisis had significant effect on economy of large world powers. In different measure, depending on degree of development of the national financial markets and degree of their integration in world economy, liquidity crisis and instability in the international financial markets affected also state of the economy of the State Parties of the CIS, including the security market which is some kind of barometer of economy. After building-up of number of domestic issuers and growth of the amount of capitalization in the stock markets of the State Parties of the CIS in 2008 in the most developed markets of the CIS fall of the stock indexes and decrease in level of market capitalization of issuers, especially those whose securities are traded not only on the national markets, but also abroad was observed.
At the same time crisis revealed the main problems and weaknesses in system of regulation of the financial market. So, reduction of the liquidity of the domestic stock markets, fall of market value of the addressing financial instruments, increase in defaults of issuers, whose securities are traded on the organized markets of the State Parties of the CIS, allowed to determine the main directions in which the existing system of regulation of the security market regarding protection of the rights and interests of investors, ensuring financial stability of professional participants of the security market and issuers, providing fair assessment of investment objects, and also assessment and management of investment and operational risks shall be enhanced.
Interaction of the State Parties of the CIS in the key directions of cooperation, including within work of Council of heads of state bodies on regulation of the security markets of the State Parties of the CIS, will give the chance to find way out of the current situation, will create platform for experience exchange and will promote improvement of the principles of functioning and further development of the stock markets of the State Parties of the CIS.
Shocks in the world financial market became the reason for overflow of investment and borrowed funds from the State Parties of the CIS and other emerging markets on the markets and in the financial instruments associated with smaller degree of investment risks. In view of aggravation of situation with liquidity and limited access to loan and investment resources the cost of borrowing rose in price owing to what the financial condition of many issuers worsened. This situation directly affected reduction in cost of securities of the issuers turned in the national stock markets about what witnesses the decreasing amount of capitalization of the stock market.
Stock market capitalization
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|Государства-участники| Капитализация рынка | Капитализация рынка |
| СНГ |акций, млн. долларов США | акций/ВВП, % |
| |-------------------------+-------------------------|
| |по состоянию|по состоянию|по состоянию|по состоянию|
| |на 01.01.08 |на 01.01.09 |на 01.01.08 |на 01.01.09 |
|---------------------+------------+------------+------------+------------|
|Азербайджанская | | | 19,5 | 25,6 |
|Республика | | | | |
|Республика Армения | 105| 176| 1,00| 1,50|
|Республика Беларусь |Данные не | 103|Данные не | 0,18|
| |представлены| |представлены| |
|Республика Казахстан | 53830| 31130| 40,84| 23,64|
|Кыргызская Республика| 1057| 1216| 25,24| 25,91|
|Республика Молдова | 663| 716| 14,04| 11,85|
|Российская Федерация | 1266442| 365413| 99,80| 26,40|
|Республика | 4| 430| 0,10| 8,40|
|Таджикистан | | | | |
|Украина | 109164| 23542| 76,48| 19,08|
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The greatest decrease in equity capitalization, being traded on the organized market, in 2008 was observed in the markets which are most integrated into the international economy: in Ukraine decrease in time 4,6, in Russia - more than for 70%, in Kazakhstan - more than for 40%.
The security markets of other states were not so subject to crisis influence - in the markets of the Kyrgyz Republic, the Republic of Moldova and the Republic of Tajikistan capitalization growth was observed.
Despite value increase of placement in the stock market, the number of the releases registered by national regulators increased practically in all State Parties of the CIS that is caused by more limited access to borrowed funds in banking sector, and also in general market development of securities and increase in financial literacy of both issuers, and investors.
Amount and the number of the issues of securities registered by the regulator of the security market
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|Государства-участники | Количество выпусков | Объем фактически |
| СНГ | | размещенных ценных бумаг |
| | | по цене размещения, |
| | | тыс. долларов США |
| |-----------------------+--------------------------|
| |на 01.01.08|на 01.01.09| на 01.01.08 |на 01.01.09|
|----------------------+-----------+-----------+--------------+-----------|
|Республика Армения | 6| 14| 8119 | 36840|
|Республика Беларусь | 5347| 5094| 8052100 | 15303700|
|Республика Казахстан | 2788| 2792| 11510000(*) | 14200000|
|Кыргызская Республика | 79| 95| 53723 | 150958|
|Республика Молдова | 87| 155| 112598 | 78283|
|Российская Федерация | 2291| 10358| - | - |
|Республика Таджикистан| 27| 55| 3,6 | 430|
|Украина | 2698| 2614| 17305,45 | 19875919|
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----------------
(*) According to debt securities, without share issues and shares.
On the trading volumes in the organized market of securities the three of the largest includes the markets of the Republic of Kazakhstan, the Russian Federation and Ukraine though the trading volume ratio to GDP still remains at the minimum level.
The trading volume financial instruments in the organized market for 2008
(thousand dollars of the USA)
---------------------------------------------------------------------- | Государства-участники | Общий объем торгов на | Объем торгов/| | СНГ |первичном и вторичном рынках | ВВП, % | |-----------------------+-----------------------------+--------------| |Республика Армения | 13516| 0,1 | |Республика Беларусь | 571900| 0,98| |Республика Казахстан | 48562000| 0,37| |Кыргызская Республика | 234625| 4,9 | |Республика Молдова | 95842| 1,6 | |Российская Федерация | 2037110000| 146,2 | |Республика Таджикистан | 6000| 0,1 | |Украина | 4870650| 4 | ----------------------------------------------------------------------
Thus, regarding the offer in the security market practically in all State Parties of the CIS increase in number of the turned financial instruments and forward market development of securities are observed (except for the markets which are most integrated into the international economy and, as a result, subject to fluctuations in the foreign stock markets). In general the low level of development of the security markets is still observed what demonstrates low value of ratio of level of capitalization and the trading volume in relation to GDP to that also means availability of considerable potential of further development of the national markets on condition of creation of their competitiveness in comparison with the foreign markets of developed countries.
Concerning demand for financial instruments growth of number of institutional investors, being the main category of investors in emerging markets of securities is also observed. Though as it was noted above, the liquidity crisis was reflected also in their financial condition.
Number of institutional investors and size of their assets
---------------------------------------------------------------------------
|Государства-участники | Количество |Размер актив- |
| СНГ | институциональных |ов,тыс. долл- |
| | инвесторов |аров США |
| |-----------------------+--------------------------|
| |на 01.01.08|на 01.01.09| на 01.01.08 |на 01.01.09 |
|----------------------+-----------+-----------+-------------+------------|
|Республика Армения | 66| 68| 2713173 | 3615324 |
|Республика Беларусь | 61| 65| 25400 | 51200 |
|Республика Казахстан | 527| 588| 2960000 | 3690000 |
| | | | (580000)| (1140000) |
|Кыргызская Республика | 6| 8| - | 1224,9|
| |--------------------------------------------------|
|Республика Молдова |В настоящее время институциональные |
| |инвесторы отсутствуют |
| |--------------------------------------------------|
|Российская Федерация | 1430| 1595| 32089984 | 22707919 |
|Республика Таджикистан| 16| 17| 13435 | 17521 |
|Украина | 796| 1159| 4976583 | 52722286 |
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Notes:
1. The size of investment assets is specified in brackets.
2. According to information provided by the National commission on the financial market of the Republic of Moldova (further - NKFR), according to the changes in the Law "About Investment Funds" accepted by Parliament of the Republic of Moldova on April 28, 2005 investment funds stopped the professional activity in the security market, having obligation to redeem the securities belonging to them from the shareholders, having transformed to joint-stock companies, or initiated liquidation procedure (on voluntary basis or according to the solution of NKFR).
Now in the Republic of Moldova temporarily there are no institutional investors. Their emergence should be expected after adoption by Parliament of the Republic of Moldova of the new Law on collective investments, developed NKFR.
Concerning other type of institutional investors - the pension funds - in 2008 NKFR issued permission to state registration of the first pension fund which did not begin the activities yet.
In view of reducing the size of assets of institutional investors it is necessary to expect as well reducing investment assets that is aggravated with increase in the risks connected with investment of means into financial instruments. This factor substantially contains growth of the national stock markets.
As for the number of the professional participants of the security market representing market infrastructure, practically in all states growth of number of the organizations performing professional activity in the security market is observed.
The number of the organizations performing certain type of professional activity in the security market (*)
---------------
(*) If one organization carries out several types of professional activity, in this table such organization is considered on each type of activity separately.
---------------------------------------------------------------------- | Государства-участники СНГ | На 01.01.08 | На 01.01.09 | |---------------------------+----------------------+-----------------| |Азербайджанская Республика | 37| 34| |Республика Армения | 29| 87| |Республика Беларусь | 171| 179| |Республика Казахстан | 212| 217| |Кыргызская Республика | 72| 81| |Республика Молдова | 68| 55| |Российская Федерация | 3670| 3710| |Республика Таджикистан | 4| 7| |Украина | 1631| 1877| ----------------------------------------------------------------------
The most dynamic growth of number of professional participants (almost by 3 times) is observed in the Republic of Armenia due to increase in number of the organizations performing broker, dealer and custodial activities.
Besides, the number of professional participants considerably increased in Ukraine (by 14%) in connection with growth of number of the organizations performing custodial, broker and dealer activities, and also activities for management of investment portfolio.
Reducing number of professional participants of the market is observed in the Republic of Moldova (for 19%), and also in the Russian Federation where despite preserving in general stable situation in 2008 considerable decrease in number of the organizations exercising investment control of pension assets was observed (more than twice, from 223 to 109), at the same time the number of managing directors of investment portfolio increased by 12%.
If to assess situation in the security market of the certain State Parties of the CIS, the following tendencies are observed here.
Based on the State committee on securities in case of the President of the Azerbaijan Republic the State committee of the Azerbaijan Republic on securities was created on November 19, 2008 (further - the State committee). In 2009 the Presidential decree of the Azerbaijan Republic approves the Charter and structure of the State committee.
According to the State committee, the global financial crisis did not influence the security market of Azerbaijan in view of the fact that the domestic security market is not integrated into world economy.
Now in the market government securities, including notes of the Central bank prevail. As the main subject of purchase and sale serve the corporate and belonging to the financial sector debt instruments, the specific weight of shares is small therefore distribution channels on the local market of processes of world economy are practically absent.
The analysis of situation in the market is complete, and now the State committee develops the project about forming and market development of securities which covers number of the directions. First of all it is planned to enhance the legislation of the security market, mainly for the purpose of transfer of implementation of agreements in the mode of real time. It is in parallel provided to establish relation of transactions in the market with national payment system. Other directions - activation of explanatory work in this sphere, and also increase in professionalism of participants of the market (*).
---------------
(*) Information on the Azerbaijan Republic is provided from the websites of news from the Internet.
In 2008 there were noticeable changes in development of the stock market of the Republic of Armenia, and at the same time it was succeeded to avoid direct influence of the global financial crisis.
JSC NASDAQ OMX Armeniya (earlier - JSC Armenian stock Exchange) founded in 2001 as self-regulatory organization based on voluntary merging of 21 broker (dealer) companies at the beginning of November, 2007 was reorganized into open joint stock company. Since January 7, 2008 the OMH company (nowadays - NASDAQ OMX) is 100% shareholder of NASDAQ OMX stock exchange Armenia and the Central depositary of Armenia.
As of February 20, 2009 on the NASDAQ OMX stock exchange Armenia are registered and there underwent listing 23 issues of securities, and capitalization of stock exchange constituted 53,3 of one billion dram (143 million US dollars, 1 US dollar = 372,02 the drama).
Besides, JSC NASDAQ OMX Armeniya has the license for the organization of auctions for purchase and sale of currency granted by the Central bank of the Republic of Armenia on November 7, 2005. The biddings on the currency platform officially started on November 15, 2005.
Within rule-making activities of authorized body of the Republic of Armenia for regulation of the security market drafts of the Laws "About Investment Funds" and "About Funded Pension System" within which activities of the investment and pension funds will be regulated are developed.
In 2008 in the Republic of Belarus 121 releases of corporate bonds for total amount 2, were registered by 2 trillion Belarusian rubles (about 1 billion US dollars). In three months 2009 18 releases of corporate bonds for total amount 327, are registered by 6 billion Belarusian rubles (about 149 million US dollars).
In 2008 in trade system of the exchange of the Republic of Belarus it is allowed to placement of 6 releases of exchange bonds which total amount of transactions on placement for January 1, 2009 made 47, 3 billion Belarusian rubles (21, by 5 million US dollars).
As for the stock exchange market of shares, for its activation the Decision of the Government according to which transactions of purchase and sale of shares of open joint stock companies are made only in the stock exchange market is made. For total year the amount of transactions with shares at the exchange made 201, 8 billion Belarusian rubles (91, 7 million US dollars) that is 25,6 times more in comparison with 2007. The amount of the shares which are in circulation for January 1, 2009 made 31, 2 trillion Belarusian rubles (14 182 million US dollars) that is 1,9 times more than similar indicator for the beginning of 2008.
Besides, there were also high-quality changes in the stock market. If in 2007 the main source of forming of authorized capital of the companies and banks were own means, then last year the situation cardinally exchanged. For 71% of investment in their authorized funds were financed at the expense of share issues.
In general for the beginning of 2009 in the security market there were 65 professional participants of the security market, from them 26 - banks (for January 1, 2008 - 61 professional participants from which 26 banks).
In January, 2008 the Development program of the market of corporate securities for 2008-2010 which main goal is creation of necessary conditions for formation of the complete, liquid, transparent and efficient market of securities as component of the financial market of the Republic integrated into the world market of securities and promoting investment attraction first of all in real production sector was adopted.
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